Paragraph
323-10-15-3 explains that references in this Subtopic to
common stock refer to both common stock and
in-substance common stock that give the
investor the ability to exercise
significant influence over operating and financial policies of an
investee even though the investor holds 50% or less of the common stock or in-substance common stock (or both common stock and in-substance common stock).
If an equity method investment agreement involves a contingent consideration arrangement in which the fair value of the investor's share of the investee's net assets exceeds the investor's initial cost, a liability shall be recognized.
Example 2 (see paragraph
323-10-55-19) illustrates the application of this guidance
for share-based compensation granted to employees of an equity method investee. For the purposes of applying the equity method of accounting to an investee subject to guidance in an industry-specific Topic, an entity shall retain the industry-specific guidance applied by that investee.